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E-Commerce News
Soutwest Airlines Cancels Online Reservation Service; Google Adwords Program Grounded By American Airlines
December 4, 2007
SOUTHWEST AIRLINES CANCELS ONLINE RESERVATION SERVICEA Website may limit a commercial user from accessing the site by terms and conditions set out in a hyperlink on the site’s home page. Commercial users who continue to use the site in violation of the terms and conditions may violate the federal Computer Fraud and Abuse Act ("CFAA"). That’s the finding from a federal court sitting in Dallas.
The case pitted Southwest Airlines against an online check in service called BoardFirst. Southwest, utilizes an "open seating" policy. The airline divides its passengers into 3 groups for boarding. Passengers in group A board first, passengers in group B board second, and passengers in group C board last. Southwest allows passengers to check in as early as 24 hours prior to departure, either online or at the airport.
BoardFirst set up its online shop in 2005. It attracted Southwest customers who were willing to pay a fee to ensure early boarding. BoardFirst would check in its fee paying customers on the Southwest Web site early enough to ensure a place in Group A.
Southwest’s terms and conditions of use prohibited commercial use of its site. It delivered a number of cease and desist letters to BoardFirst that were ignored. Southwest finally filed a breach of contract suit against BoardFirst for allegedly violating the terms and conditions governing the use of Southwest's Web site.
Southwest argued that BoardFirst breached the contract when it used the site contrary to the terms and conditions. The court found that the validity of the terms and conditions depended on whether BoardFirst had actual or constructive notice of them. The court found that the terms and conditions applied because BoardFirst had actual knowledge no later than when it received the first cease and desist letter.
BoardFirst argued that even if it knew about the terms, it didn’t breach the contract because it was merely acting as an agent for the passengers, each of whom clearly had the right to register online. This was in essence a "no harm no foul" approach. The court was unimpressed. Because it charged a fee, BoardFirst was a commercial user. And Southwest prohibited that use.
And speaking of "prohibit," the court issued a permanent injunction barring BoardFirst from using the Southwest site in violation of its terms because Southwest established the likelihood of its success on its breach of contract claim even though it couldn’t prove the amount of damages the breach caused. The court imposed the injunction knowing it would effectively put BoardFirst out of business. In the court’s view, that consequence arose from the fact that BoardFirst's business was entirely based on an impermissible use of Southwest's Web site.
In what may have been the most interesting aspect of the case, the court left open the question of whether BoardFirst's actions violated the CFAA. That statute provides a civil cause of action against any person who "intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains information from any protected computer if the conduct involved an interstate or foreign communication" if the loss resulting from the violation totals at least $5,000 in any one-year period.
The court found that BoardFirst intentionally accessed Southwest’s site, but held off on finding a violation because there was no record developed on whether the access was authorized. Perhaps the court didn’t want to kick BoardFirst when it was down.
The CFAA issue could be a powerful tool for businesses that wish to limit other companies from tagging on to its online business. It will be interesting to see if this theory "takes off."
GOOGLE ADWORDS PROGRAM GROUNDED BY AMERICAN AIRLINES
The search engine giant Google recently lost a battle in the ongoing war over its keyword advertising program when a federal court in Dallas denied Google Inc.'s motion to dismiss American Airlines' allegations that Google violated the Lanham Act by selling search keywords to an American Airlines' competitor.
Google’s program involves selling keywords, including trademarked terms, that trigger the appearance of a competitor’s advertisement on a browser’s screen when that browser searches for the keyword. Thus, for example, Google would sell to a competing airline the term "American Airlines." Whenever anyone searched Google for "American Airlines" an ad for the competitor would appear.
In other decisions, most notably a Second Circuit case, and several New York federal trial decisions, courts have held that the Google program does not constitute a "use in commerce." Because a Lanham Act violation requires a "use in commerce," that finding precluded an action.
Federal courts sitting in Virginia and California, however, have found that the program constitutes a use in commerce, and can support an action for violation of the Lanham Act. While such a finding does not guarantee victory for the victimized party (it has been difficult to establish damages in these cases) it at least allows the action to proceed.
The federal court in Dallas joined those courts that have found that the Google program constitutes a use in commerce. This issue is in many respects a creature of the Internet, and it will be interesting to see how it ultimately is decided. The final word may have to come from the United States Supreme Court. For additional discussion on this point, check out this link:
Internet Search of Your Name, Company Might Hold Surprises.
This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.